Ethereum’s supply model has changed dramatically over the last few years. Thanks to key Ethereum Improvement Proposals (EIPs), ETH is no longer just inflationary — in some periods, it has even become deflationary.
Let’s break down what changed and why it matters 👇
What Are EIPs?
EIPs (Ethereum Improvement Proposals) are upgrades that improve:
Network efficiency
Fee structure
Security
Long-term sustainability
Some EIPs directly impact ETH supply dynamics.
EIP-1559: Fee Burn Mechanism
Introduced in 2021, EIP-1559:
Burns a portion of transaction fees
Removes ETH from circulation permanently
Makes fees more predictable
📌 Higher network activity = more ETH burned.
This was a major shift from pure inflation.
The Merge & Proof of Stake
With The Merge, Ethereum:
Switched from Proof of Work to Proof of Stake
Reduced ETH issuance by ~90%
Lowered selling pressure from miners
Issuance dropped — while burns continued.
Deflationary ETH Explained
When:
ETH burned > ETH issued
→ Total ETH supply decreases
This often happens during:
High DeFi activity
NFT booms
Network congestion periods
ETH becomes scarcer over time.
Current ETH Supply Structure
Issuance: Controlled via staking rewards
Burn: Driven by network demand
Net supply: Fluctuates between inflationary and deflationary
📌 Supply now responds to real usage.
Why This Matters for Investors
ETH supply is no longer fixed inflation
Increased utility strengthens scarcity
Long-term value aligns with network adoption
Utility + scarcity = stronger fundamentals.
Common Misconceptions
❌ ETH is always deflationary
❌ Burning guarantees price increases
❌ Supply matters more than demand
Supply is powerful — but demand still leads.
Final Thoughts
EIP updates transformed Ethereum into a usage-driven monetary system. ETH supply now reacts to how much the network is actually used — a unique model in crypto.
📌 Ethereum doesn’t just run applications — it adjusts its own economics.